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Monday, June 11, 2012

Sugar taxes re-visited: An economic and nutritional analysis

Following an
extremely successful Policy Workshop
of the UCD Institute of Food and Health last Friday, I return to the issue of
fat and sugar taxes. We had two economists and two nutritionists from UCD.The main focus was a tax on
sugar-sweetened beverages, which interests the Irish government, such that they
have created a Health Impact Assessment exercise to explore this option.Just under half or Irish adult males
are overweight while the comparable figure for females in just under one third.
The respective figures for obesity levels are one quarter and one fifth. So, we
have a problem as has most developed countries. Anne Nugent presented data from the National
Adult Nutrition Survey and used these data to examine various parameters
across quartiles of calories from sugars (non-milk sugars). From the lowest to
the highest quartiles, there were no differences in any measure of obesity or
of fat distribution.It could be
argued that total non-milk sugars is a poor tracker of the intake of sugar-sweetened
beverages so Anne made a comparison of obesity indicators cross thirds of
intakes in sugary beverages and only among consumers of these products. Going
from the lowest third to the highest third of intakes of sugar-sweetened
beverages, there were absolutely no differences in any measure of obesity or
fat distribution. One very important statistic is that only 40% of Irish
individuals actually consume sugar-sweetened beverages on a regular basis. It
is this 40% alone who would pay a tax on sugary beverages.Moreover, a tax on sugar-sweetened beverages
would ignore the obesity issues in the 60% of the population that doesn’t
consume these products. The total contribution of sugar-sweetened beverages to
caloric intake is 1.2% for the populations as a whole (consumers plus
non-consumers) and this rises to 3.6% among consumers only. Even if a tax were
to reduce intakes of these products by 50%, it would have reduced their
contribution to caloric intake by 1.8%. It’s hard to see how that would have an
effect since quite some of that would be compensated by the intake of other
foods. Moreover, there is 60% of the population who are mere spectators in this
charade since they don’t consume sugar-sweetened beverages.

The question
also arises of alternatives to sugar-sweetened carbonated beverages – what could
or should people consume instead?Fruit juices represent the most commonly consumed beverage in Ireland
after teas, coffees and waters and could be suggested as a ‘healthier’
alternative. If the 40% of Irish consumers of carbonated beverages were to switch
to drinking fruit juice at the same volumes which they currently consume sugar
sweetened carbonated beverages, the difference in calorie intakes between the
two beverage types works out at a mere 10 kcal/d!

My own
contribution ranged across the epidemiology of obesity, physical activity and
the genetics of obesity but the most important points relevant to this blog are
the policy issues presented. . Most of the studies linking sugar-sweetened
beverages and obesity are based on observational studies, an example of which
are the data presented by Anne Nugent. These data do not prove cause and
effect. To do so, we need to construct very large multi-centre studies of sufficient
duration to see any true effect. The Women’s Health Initiative on dietary fat,
The DASH study on diet and hypertension, The DART and GISSI studies on fish
oil, the MRC trial on folic acid are all examples of these large
internationally approved intervention studies specifically design to test the
true cause and effect hypothesis. As regards reducing or increasing intakes of
sugar-sweetened beverages, no such study exists. In the EU, we demand multiple
human intervention trials to sustain health claims on foods and clearly that
bar is too high for public health nutrition policy.

Dr Kevin Denny of the UCD Geary Institute gave on over-view of some
of the wider issues that economists would take into account with regard to
taxes on foods or nutrients. Kevin pointed out that economists start with the
view that the individual knows what is best for them personally. However, for
some groups and in certain instances, this may not be the case. The information
upon which a decision is to be made may be poorly available, too complex or
because time and emotion defer an informed decision. Policy decisions in such
instances therefore start with education and then move to regulation of some
form, which might include taxes. Taxes that are designed to introduce enhanced
social behaviour are referred to as Pigouvian taxes and it
could be argued that food taxes fall into this category if we think that
people’s consumption of food is not socially optimal for some reason.But one needs to be clear about why
people’s food consumption imposes a burden on society. The standard argument is
that eating too much (& hence causing obesity) imposes a burden as the
tax-payer will pick up most of the additional health costs (estimated at about
€400 million p.a. in Ireland). In that context however, taxing nutrients such
as calories should only apply to those calories that are consumed in “excess .
If for example, people don’t consume many calories or they burn-off what they consume
through exercise, there is no reason to tax such calories. Taxing calories for
individuals in energy balance would be unfair. The taxing of nutrients is made
more complex by the fact that foods contain multiple nutrients. Taxing the fat
in cheese ignores the important contribution cheese makes to calcium intake
among consumers of cheese. A key point made by Kevin is the sequence of steps
the economist would look at always assuming the nutritionists really did have
genuine target for taxation in the first instance: How much to tax? How does
that affect price given that taxes are often not passed on in full to
consumers? In turn, how does that influence consumption of the foods concerned?
How the does that influence BMI and, of course eventually health costs? He went
on to cite the work of Powell
& Chaloupka who conclude that: “The
limited existing evidence suggests that small taxes or subsidies are not likely
to produce significant changes in BMI or obesity prevalence but that nontrivial
pricing interventions may have some measurable effects on Americans' weight
outcomes, particularly for children and adolescents, low-SES populations, and
those most at risk for overweight. Additional research is needed to be able to
draw strong policy conclusions regarding the effectiveness of fiscal-pricing
interventions aimed at reducing obesity”. In other words minor taxes will
have little effect and that effect would only be seen with quite considerable
taxes.

This leads
nicely into the paper by Professor
David Madden of the School of Economics.He used data from the nationally representative Household
Budget Survey to examine the impact of possible fat taxes on poor
households.His results showed
that pretty much any food-based fat-tax will have a disproportionate effect on
poor households, reflecting the general tendency across all countries for poor
households to devote a higher fraction of their budget to food.However, a revenue neutral tax/subsidy
package, with higher taxes on some foods combined with lower taxes on other
foods would be neutral in its poverty impact, and could even be mildly
beneficial to poor households.In
terms of a tax on sugar-sweetened beverages, the impact of a 10% tax on poor
households would be relatively modest, given that sugar-sweetened beverages are
a relatively small fraction of the budgets of poor households.Depending upon the ability of
government to accurately target poor households to compensate them for such a
tax, the cost of compensation in 2005 prices would most likely be less than
€10m.However, this takes no
account of the loss in welfare borne by non-poor
households from such a tax.

So, in summary
we have a proposal to tax sugar-sweetened beverages, which contribute 0% of
daily calories among the 60% of the population who don’t consume them and which
contribute a mere 3.6% to the caloric intake among consumers of these products.
In doing so, we ignore the obesity issues of the 60% of non-consumers and,
among consumers, we tax those who are lean and those with excess body fat. And
we do all this with zero data from internationally acceptable randomised
controlled intervention studies on the effects of sugar-sweetened beverages on
medium term body weight regulation.Whereas we insist that such studies govern health claims as regulated by
the European Food Safety Authority, that doesn’t seem to apply to public health
nutrition policy. Moreover, we do so knowing that food taxes that are small
will be ineffective and to be successful they must be significant. And of
course we do this knowing that it will hit the poorest in society with the
greatest financial burden unless
we find some way to subsidize a healthy food eaten in significant quantities by
poorer households. Simple, isn’t it?

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"Ever seen a fat fox ~ Human obesity explored"

About Me

I graduated from University College Dublin in 1971 with an Masters in Agricultural Chemistry, took a PhD at Sydney University in 1976 and joined the University of Southampton Medical School as a lecturer in human nutrition in 1977. In 1984 I returned to Ireland to take up a post at the Department of Clinical Medicine Trinity College Dublin and was appointed as professor of human nutrition. In 2006 I left Trinity and moved to University College Dublin as Director of the UCD Institute of Food and Health. I am a former President of the Nutrition Society and I've served on several EU and UN committees on nutrition and Health. I have published over 350+ peer reviewed scientific papers in Public Health Nutrition and Molecular Nutrition and am principal investigator on several national and EU projects (www.ucd.ie/jingo; www.food4me.org). My popular books are "Something to chew on ~ challenging controversies in human nutrition" and "Ever seen a fat fox: human obesity explored"